Mega-retailer Best Buy agreed to pay $3.8 million to settle allegations that the company distributed and sold recalled products, a violation of the Consumer Product Safety Act (CPSA) after the 2008 amendments. U.S. Consumer Product Safety Commission (CPSC) staff alleged that the retailer sold more than 600 recalled units, including over 400 Canon cameras, to consumers, as well as items such as electric ranges (subject to a 2012 recall) and dishwashers (subject to a 2012 recall). Overall, the retailer sold 16 separate products subject to recalls announced between September 2010 and July 2015. CPSC and the retailer jointly reannounced 10 of the recalls in July 2014. In addition to the $3.8 million civil penalty, Best Buy agrees to maintain a compliance program designed to ensure compliance with the CPSA, including program for the appropriate disposal of recalled products. The CPSC asserted that the Company’s prior system failed to accurately identify, quarantine, and prevent the sales of recalled products. In some case, the company apparently failed to permanently block specific product codes, or even reactivated those codes or had them overridden. This occurred even after the company had assured CPSC the measures were adopted to prevent the sale of recalled products.

This settlement is notable for two reasons. First, this announcement is one of several in recent years involving the sale of recalled products, and in this case (as in some previous cases) it involves a retailer that was not the initiator of the recall. The CPSC has increasingly sought to obtain settlements from companies for the further sale of recalled products. In these settlements, the CPSC has generally imposed requirements to implement two separate but related systems: (1) a system for ensuring compliance with the CPSA, and in particular for the reporting of information about substantial product hazards to the CPSC and for the appropriate disposal of recalled products; and (2) a system of internal controls and procedures. The settlement in this case serves notice on all members of the supply chain that they are under an obligation not to sell recalled products.

Second, this settlement is yet another data point showing a trend of the increasing high stakes for settling CPSC civil penalty actions. The Best Buy announcement is the first settlement announced in fiscal year 2017 (which began October 1, 2017), but the table below shows the civil penalty trends for the last three federal fiscal years:

CPSC Civil Penalty Settlements: The Numbers

Please click here to view table.

Given the increasing penalty amounts and the increasing focus by CPSC on actions by all members of the supply chain, careful attention to internal compliance processes and procedures is a must.